LNG

Pressure on European and global natural gas markets has eased since the beginning of 2023 due to favourable weather conditions and policy actions discouraging gas use, though several factors point to possible supply risks in the fourth quarter.

By the end of first quarter of 2023 European hub and Asian spot liquefied natural gas prices had fallen below their summer 2021 levels but they remained well above their historic averages, according to the May gas report from the International Energy Agency.

It noted that the steep decline in natural gas demand reduced the need for storage withdrawals in Europe and the United States over the 2022-2023 winter.

As a result, storage sites closed the heating season with inventory levels standing well above their five-year averages.

“This is expected to reduce injection demand during the summer of 2023, and potentially ease market fundamentals,” stated the Paris-based IEA.

“However, the improved outlook for gas markets in 2023 is no guarantee against future volatility and should not be a distraction from measures to mitigate potential risks,” added the report.

Tight supplies

“Global gas supply is set to remain tight in 2023 and the global balance is subject to an unusually wide range of uncertainties. These include adverse weather factors, such as a dry summer or a cold fourth quarter and lower availability of LNG,” added the report.

The IEA explained that while the share of OECD Europe’s gas demand met by Russian pipeline gas fell to well below 10 percent in the 2022-2023 heating season, LNG effectively became a baseload supply for Europe, meeting over one-third of the region’s gas demand over the winter.

Russian piped gas exports to OECD Europe fell by an estimated 70 percent (or 50 Bcm) year-on-year during the winter.

While deliveries to Turkey declined by close to 30 percent, gas flows to the European Union plummeted by over 80 percent, translating into a drop of 47 Bcm compared to the previous heating season.

In contrast, Russia’s LNG exports to the EU rose by 5 percent compared with the previous winter period.

LNG flows from the United States increased by 30 percent, or almost 10 Bcm year-on-year, to account for over 45 percent of incremental LNG supply into Europe.

“This further reinforced the position of the United States as Europe’s largest supplier, accounting for over 40 percent of the region’s total LNG imports and meeting almost 15 percent of its gas demand,” said the IEA.

“Qatar increased its gas deliveries by 15 percent (or 1.5 Bcm), primarily supported by higher supplies to Belgium, France, Italy and Poland,” added the report.

Sept 3 (LNGJ) - Mitsui OSK Lines (MOL) of Japan has signed an accord with the Russian state leasing company (GTLK) for the possible acquisition of a 49 percent stake in two LNG floating storage units (FSUs) currently being built and with 100 percent ownership held by GTLK. The FSUs will have the world’s largest storage capacity of about 360,000 cubic metres and will be deployed by Russian natural gas company Novatek at Kamchatka and Murmansk for LNG cargo trans-shipments from the existing Yamal plant and Arctic II facility now under construction.

   The two FSUs are being built by Daewoo Shipbuilding and Marine Engineering of South Korea. “By transporting LNG via the Northern Sea Route and by trans-shipping at Kamchatka and Murmansk, it is expected to reduce voyage costs and greenhouse gas emissions. In addition, securing LNG at a location close to a point of consumption is believed to increase security and reliability of energy supply,” explained MOL.

Novatek, the Russian natural company and owner of the Yamal LNG export plant in northern Siberia, has formally ended its re-loading activities offshore the Norwegian port of Honningsvag that saw several million tonnes of LNG transferred from Ice-class carriers to conventional vessels and shipped to European terminals and beyond.